INVESTMENT PROPERTIES (Tables)

6 Months Ended

Jun. 30, 2022

Schedule of roll forward of investment property balances

The following table presents a roll forward of the partnership’s investment property balances, all of which are considered Level 3 within the fair value hierarchy, for the six months ended June 30, 2022 and the year ended December 31, 2021:


	Six months ended Jun. 30, 2022						Year ended December 31, 2021
(US$ Millions)	Commercial properties		Commercial developments		Total		Commercial properties		Commercial developments		Total
Balance, beginning of period	$	62,313	$	2,300	$	64,613	$	70,294	$	2,316	$	72,610
Changes resulting from:
Property acquisitions	710		—		710		491		80		571
Capital expenditures	368		252		620		796		758		1,554

Property dispositions(1)	(34)		(1)		(35)		(1,299)		(351)		(1,650)
Fair value gains (losses), net	1,115		104		1,219		1,791		171		1,962
Foreign currency translation	(847)		(106)		(953)		(558)		(37)		(595)
Transfer between commercial properties and commercial developments	126		(126)		—		635		(635)		—

Reclassifications to assets held for sale and other changes	(3,973)		(447)		(4,420)		(9,837)		(2)		(9,839)
Balance, end of period(2)	$	59,778	$	1,976	$	61,754	$	62,313	$	2,300	$	64,613

(1)Property dispositions represent the fair value on date of sale.

(2)Includes right-of-use commercial properties and commercial developments of $547 million and $21 million, respectively, as of June 30, 2022 (December 31, 2021 - $557 million and $24 million). Current lease liabilities of $28 million (December 31, 2021 - $118 million) have been included in accounts payable and other liabilities and non-current lease liabilities of $542 million (December 31, 2021 - $558 million) have been included in other non-current liabilities.

Schedule of key valuation metrics for investment properties

The key valuation metrics for the partnership’s consolidated commercial properties are set forth in the following tables below on a weighted-average basis:


		Jun. 30, 2022					Dec. 31, 2021
Consolidated properties	Primary valuation method	Discount rate		Terminal capitalization rate		Investment horizon (years)	Discount rate		Terminal capitalization rate		Investment horizon (years)
Core Office	Discounted cash flow	6.6	%	5.3	%	11	6.5	%	5.3	%	11





Core Retail	Discounted cash flow	6.9	%	5.3	%	10	7.0	%	5.3	%	10
LP Investments(1)	Discounted cash flow	9.5	%	7.0	%	8	9.4	%	7.0	%	8

(1) The valuation method used to value multifamily, student housing, and manufactured housing properties is the direct capitalization method. At June 30, 2022, the overall implied capitalization rate used for properties using the direct capitalization method was 3.9% (December 31, 2021 - 4.3%).

Schedule of investment properties measured at fair value

The following table presents the partnership’s investment properties measured at fair value in the condensed consolidated financial statements and the level of the inputs used to determine those fair values in the context of the hierarchy as defined in Note 2(i), Summary of Significant Accounting Policies: Fair value measurement, in the consolidated financial statements as of December 31, 2021:


	Jun. 30, 2022								Dec. 31, 2021
					Level 3								Level 3
(US$ Millions)	Level 1		Level 2		Commercial properties		Commercial developments		Level 1		Level 2		Commercial properties		Commercial developments
Core Office	$	—	$	—	$	24,300	$	1,187	$	—	$	—	$	24,643	$	1,022





Core Retail	—		—		19,843		101		—		—		18,991		—
LP Investments	—		—		15,635		688		—		—		18,679		1,278










Total	$	—	$	—	$	59,778	$	1,976	$	—	$	—	$	62,313	$	2,300

The following table presents the change in the balance of financial assets and financial liabilities accounted for at fair value categorized as Level 3 as of June 30, 2022 and December 31, 2021:


	Jun. 30, 2022				Dec. 31, 2021
(US$ Millions)	Financial assets		Financial liabilities		Financial assets		Financial liabilities
Balance, beginning of period	$	2,060	$	859	$	1,682	$	863
Acquisitions		61		—		553		—
Dispositions		(178)		—		(88)		—
Fair value gains, net and OCI		(25)		74		366		2
Other		—		(11)		(453)		(6)
Balance, end of period	$	1,918	$	922	$	2,060	$	859

Schedule of fair value measurement of assets sensitivity

The following table presents a sensitivity analysis to the impact of a 25 basis point movement of the discount rate and terminal capitalization or overall implied capitalization rate on fair values of the partnership’s commercial properties as of June 30, 2022, for properties valued using the discounted cash flow or direct capitalization method, respectively:


	Jun. 30, 2022
(US$ Millions)	Impact of +25bps DR		Impact of +25bps TCR		Impact of +25bps DR and +25bps TCR or +25bps ICR
Core Office	$	555	$	827	$	1,351





Core Retail	443		698		1,061
LP Investments(1)	497		308		800









Total	$	1,495	$	1,833	$	3,212

(1) The valuation method used to value multifamily and manufactured housing properties is the direct capitalization method. The rates presented as the discount rate relate to the overall implied capitalization rate. The terminal capitalization rate and investment horizon are not applicable. The impact of the sensitivity analysis on the discount rate includes properties valued using the DCF method as well as properties valued using an overall implied capitalization rate under the direct capitalization method.